SA export sales plunged in the second quarter — tracking weak business sentiment in a manufacturing industry weighed down by political uncertainty, high electricity costs and skills flight, among a plethora of headwinds.
A second-quarter Absa manufacturing survey, conducted by the Bureau for Economic Research (BER) at Stellenbosch University, showed that domestic and export sales deteriorated sharply, falling by 22 and 32 points respectively.
The survey also showed that new domestic and export orders dropped by 25 and 35 points, “indicating sustained demand-side pressure amid constrained consumer purchasing power.”
The survey also flagged several constraints weighing down sentiment in the industry, including insufficient demand, political uncertainty and skilled labour shortages, which it says worsened during the period.
Confidence in the sector was also hurt by persistent uncertainty amid local and global pressures, while the water crunch in the country’s economic hub of Gauteng weighed down the sector.
Overall confidence in the sector declined marginally to 33 points, down from 34 in the first quarter, still well below the 100 points mark which indicates extreme confidence.
Sachin Chanderdhev, sector specialist for the manufacturing sector at Absa Business Banking, said the second-quarter manufacturing print outcome could have been worse given prevailing conditions.
“During the survey period, GDP forecast downgrades, the evolving budget 2.0/3.0 and political tension within the government of national unity (GNU) all contributed to heightened local uncertainty,” said Chanderdhev.
“Internationally, geopolitical concerns also persisted, notwithstanding the high-profile White House engagement between SA and the US.”
The survey found that domestically, the manufacturing sector, which has dwindled in size over the past three decades, faced several headwinds, including rising electricity tariffs and water supply disruptions — “particularly in the Gauteng region, compounding to the sector’s strain”.
The survey draws insights from about 700 manufacturing businesses.
The transport, capital and chemical subsectors were the main drag on sentiment in the manufacturing industry for the period.
Chanderdhev said the dim outlook by the transport sector may reflect concern about US tariff increases and uncertainty regarding the continuity of multinational production operations in SA.
Some of the green shoots for the industry include the National Treasury ditching its earlier proposal to hike the VAT rate, and the SA Reserve Bank loosening monetary policy with another 25-basis point interest rate cut last month, factors Chanderdhev said could help ease financial conditions for manufacturers.
Another glimmer of hope for the sector came via an improvement in realised fixed investment, which increased by three points, suggesting some manufacturers continue to invest in long-term resilience measures.
“Investments in renewable energy, energy-efficient machinery and backup water systems are becoming increasingly common as manufacturers look to realise cost efficiencies and mitigate market risks at the same time,” Chanderdhev said.
“While uncertainty persists, it is encouraging to see businesses adopting cost-saving innovations to strengthen their competitiveness and business continuity.”
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